More than 57% of US industry megaprojects exceed their original budget and delivery timeline; this figure grows to more than 80% for megaprojects worldwide. These overruns translate into direct, significant reduction of capital-investment capability, often not realized until the capital is committed irreversibly. This paper presents a conceptual framework for capital-allocation management. This new framework, known as advanced risk and capital-allocation management (ARCAM), aims to synchronize risk, strategy, and capital decision modeling to provide better visibility of future performance of capital-investment opportunities.
Challenges and Analysis
Boardroom Discussions. Because long-term production outlook shapes capital investment, executives are cognizant of changes that may affect capital expenditure (CAPEX) and financial capability.
